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Financial Contingency Planning: Sources of Funding Essay

California has the largest prison population in the United States and some countries around the world. For over 40 years, the incarceration levels have risen. The prison rates have risen 700 percent since 1970, today it is estimated that one in 100 adults are incarcerated. Who pays the bill for this large increase, tax payers have and will continue until the Department of Justice and government have a solid plan to reduce the overwhelming criminal justice deficient. The taxpayers are not only paying to house the prisoners but to feed them and all their medical needs. One plan that was pass by the Supreme Court was to reduce the prison population, they gave California two years to do this (Henrichson, 2012). Revenue is big for state prisons; most states rely on taxpayers to foot the bill. Around the mid 1980’s is when prisons were financed by the pay as you go method and bonds there were $9.6 billion in construction costs. In the late 1990’s the expenditures were up to $22 billion dollars, this was over half the debt it cost to finance prisons. The general obligation bond was another way to pay for prisons, but this was financed by tax revenues and back by government credit. Getting prisons built pressured the Governor at the time, Mario Cuomo, he tried to use the Urban Development Corporation (UDC), and this fund was for oversight for low-income housing. This was shot down at the state supreme court.

The lease revenue bonds became a way to pay for prisons. An entity or agency was created to build the prisons, they this agency would lease it to the government. In turn the taxpayers would pay back the loan, it was done this way because it did not require the government to ask the voters (“Public Bonds”, 2004). The Department of Justice (DOJ), just like most organizations has a contingency plan. The Antideficiency Act regulates what can and will not be paid for if the contingency plan is put into action. There are certain programs that will always keep going; they are Diversion Control, Health Care fraud and abuse control, debt collection, asset forfeiture fund, and federal prison industries. According to “United States Department Of Justice” (2013), “Also, the Bureau of Prisons’ (BOP) Buildings and Facilities and Commissary accounts have multi-year authority and have adequate carryover funding to meet expenses during a lapse in appropriations”. In the event, the California prison system would need to activate their contingency plan the Bureau of Prison Buildings and Facilities and the Prison Industries and Commissary funds would carry over to meet any expenses. The employees, including medical staff are except from any finical constraints. (U.S. Department of Justice Contingency Plan).

Public prisons became a drain on the budget since the mid 1990’s, and only getting worse. With the cost of living going up so does the cost of medical and psychiatric car. Also, another big stressor is the overcrowding in public prisons, with more inmates there is a need for more officers on duty, this results in more overtimes and hiring more officers. A way to lessen this burden is privatized prisons. There are several investors in the public stock market. Privatized prisons have investors that fund them. Miller (2012), “Private prisons can be defined in one of the following manners: a transfer of public facilities to a private organization; a contract to design and operate new prisons; and a contract to provide other services to public prisons such as transportation, medical care, food, and maintenance “(The Drain of Public Prison Systems and the Role of Privatization: An Analysis of State Correctional Systems). Private prisons do not have ties to the government, they are funded privately, however, and they may enter into a contract with the government. These contracts could be to house inmates and the government helps regulate private prisons. The public prisons use the private prisons to house many of the overcrowded prisons and the government has the power to place limitations and regulations on the organizations.

AB 109 is a bill passed by the U.S. Supreme Court that ordered California to fix the overcrowding. This required California to reduce the prison population to 137.5 percent capacity. When the U.S. Supreme Court ordered California in May to fix its overcrowded prison problem, citing constitutional protections against cruel and unusual punishment, the court rejected California’s bid for more time and upheld a two-year deadline to drastically cut inmate population in its 33 prisons to 137.5% of capacity by May 2013. To get there, there are several major steps, including a reduction of 10,000 inmates by November 28 to reach 167% of capacity. One idea California has is to use more community base programs for those non-violent prisoners who are released early.

Some of the programs include transitional housing, jobs, and medical and mental health services. A poll was taken to see how the community felt about the early release of non-violent, non-sex, and non-serious offenders back into the community, they were in favor of them being released and managed within the community (Krisberg, 2011). The new parolees are supervised by the Post-Release Community Supervision program, about 104,00 are already living within the community. These changes would slowly take place. There are currently 65,000 current prisoners that fall under the AB 109 bill. These number will change as new people go to prisons and others are patrolled. A concern of the counties is funding, with the influx of offenders they worry how the communities will afford the large amount of people (Krisberg, 2011).

Prison bonds are a fixed income security called lease revenue bonds (LRBs). These bonds are used to finance prisons. There are different types of bonds, traditional revenue bonds and lease revenue bonds. Traditional revenue bonds help repay the debt, the down side to these bonds is prisons do not generate revenue. The state treasury had to figure out how to create them, their solution was to have a private agency build the prison and then leases it to the state. The state takes money from one entity to pay another, a lot of the time it is taken from the general fund. These bonds are also tax except. The downfall to these bonds is the state can raise taxes to repay these obligations (Anderson, 2014).

California has the largest prison population in the United States. Some of the questions asked about reducing the population are will this alter rates of incarceration, probation, supervision, and community programs. The state was giving a grant totaling $650.000 dollars from the National Institute of Justice (NIJ), the James Irvine Foundation, and the Public Welfare Foundation; this grant funded the Stanford Criminal Justice Center (SCJC) to conduct the research. The SCJC was asked to effectively help California undertake and assess the realignment. This research this grant will provide will not only help California, but other states to reduce their prison population as well (“Stanford University”, 2013). There is another program called Fund for Nonviolence. This program is having several grants under the justice with dignity program. The total grants for 2013 were $372,500 and had 13 different grants that were awarded. Most of them were directed toward inmates who released back into the community; these grants were to help them to start over (“Fund For Nonviolence”, n.d.).

It is predicted that in the two years over 3,700 more beds will be added to prisons. The state of California faces being held in contempt if they fail to meet their deadline of overcrowding. This brings up more costs for the state to have to fight this matter in court. Three judges orders 34 prisons to be downsized. The state faces two class-action lawsuits because the overcrowding has led to deaths. A report released by the correction’s department shows there is a $500 million dollar expansion project that would allow for two more prisons to be built, that means more officers, more health care staff, and more beds, just to 26,000. California passed the three strikes law and there has been a 36% increase in admissions. The three strikes law increased the prison population by 34,000. This is a record high for California (“Governing The States And Localities”, 2014).

One answer California has to help offset the budget constrains is legalizing marijuana. The idea would be to use the excise tax, which could yield $770-900 million per year and the sales tax, another $240-360 million a year to reduce the states swelling budget. If the state was to legalize marijuana this would save over $200 million prosecution, arrest, trial, and prison time (Gieringer, 2009). The state of California is faced with a big challenge, how to reduce prison size and keep the re-entry rate low. The three strikes law has not helped with lowering the numbers. The Supreme Court passed AB 109, which told California they had two years to lower the prison population.

California is faced with two on ongoing law suits that claim wrongful death suits. The state government has gone over how to reduce the budget and be able to find revenue to make the deficit lower. One thought was to legalize marijuana; this would not only bring a large revenue but also save on costs from arrest, court, and jail time. Another approach was to build two more prisons to increase the population by 34,000. Also, the state could use more private prisons, they are funded by private entities but are still backed by the state. The prediction is the prison population will steadily increase, there for the need for more beds and more staff is apparent.


Anderson, A. (2014). Forbes. Retrieved from http://www.forbes.com/2008/10/22/prison-correctional-bonds-pf-ii-in_aa_1022fixedincome_inl.html

Eaton, K. (2002-2011). BI. Retrieved from http://blog.bi.com/industry-news/ab-109-what-is-it-and-what-does-it-mean-to-california-counties

Fund for Nonviolence. (n.d.). Retrieved from http://www.fundfornonviolence.org/index.html

Gieringer, D. (2009). California NORML. Retrieved from http://www.canorml.org/background/ca_legalization2.html

GOVERNING The States and Localities. (2014). Retrieved from http://www.governing.com/news/headlines/california-prison–overcrowding-its-going-to-get-worse.html

Henrichson, C. (2012). VERA Institution of Justice. Retrieved from http://www.vera.org/sites/default/files/resources/downloads/Price_of_Prisons_updated_version_072512.pdf

Krisberg, B. (2011). Berkeley Law University of California. Retrieved from http://www.law.berkeley.edu/files/REALIGNMENT_FINAL9.28.11.pdf Miller, D. (2012). Pro Quest A discovery guide. Retrieved from http://www.csa.com/discoveryguides/prisons/review.pdf

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